Afternoon wheat: A bounce in KC wheat

Chicago July wheat battled both sides of unchanged today before finishing with minor losses. Once again, not much change to the chart. For now, resistance remains between $6.25 and $6.30. Initial support remains between $6.00 and $5.95. The market needs a close outside of this parameter to change the dynamic of trade, and like many grain markets, once it was to get that settle, the move could be quite powerful. July KC wheat made a run at the $8.00 level right at the end of the night/beginning of the day, the level held, and futures raced higher, ultimately rallying almost thirty cents before giving away much of its gains over the latter half of the session. Still, it was an impressive bounce off what is expected to be support, and after this morning's reaction, there is no reason to change where we could probably expect to find further support. Was not very thrilled with how the market finished, which opens the door for a two-sided trading session again tomorrow. Moving resistance down a nickel to $8.45. A move below $8.00 may trigger another wave of selling. The July KC/Chicago spread fell below the $2.00 area and made a run at $1.95 before making a huge reversal and rallying almost twenty cents. It was an important move in the spread as a settle below $1.95 would have been a bad trade. The spread still has plenty of work to do before having any ideas that the break may be over. Today's finish was a good start. The next step would be a settle above $2.30.

Many of the same storylines reverberate around trade. Expectations were for the sales report this morning to be disappointing, and it was. Fresh demand continues to be dismal, and the rally this week in the US Dollar is not helping matters. In fact, the Dollar has steadily climbed for several weeks in a row, with today's close its highest since mid-March. Much of this comes as the debt ceiling debate drags on - a deal must be struck by Tuesday night to avoid a default.

The grain markets have a full trading day tomorrow, but there will be no grain trade Sunday night or during the day on Monday, before re-opening Monday night at 7:00 pm.

Headline news:
Wheat sales came in at a net NEG 45 TMT (back-to-back weeks of marketing year lows) but had an additional 245 TMT of new crop sales, for combined sales of 200 TMT. In old crop, China bought 68 TMT, but 65 TMT of that was switched from Unknown, and we already knew about this after Monday's grain shipments (and mentioned in the wire Monday afternoon and yesterday). Also, Nigeria bought 16 TMT, but 15 TMT of that was also switched from Unknown. Japan cancelled 63 TMT, Unknown cancelled 59 TMT, and the Philippines cancelled 16 TMT. In new crop, Japan bought 144 TMT, Guatemala bought 46 TMT and the Philippines bought 22 TMT. There were no new crop cancellations.

Total wheat commitments (outstanding sales plus shipments) are 18.841 MMT (692.23 mil bu) which is 3.06% behind last year's commitments for this date (714.07 mil bu). Total commitments are 89.33% of USDA's projected exports of 775 mil bu. Old crop outstanding sales on the books stand at 1.551 MMT (vs last year at this time of 1.279 MMT), and are led by Unknown 287 TMT, Philippines 208 TMT, Japan and Korea (each with 162 TMT), Mexico 147 TMT, and Thailand 140 TMT. China only has 7,400 mt. New crop outstanding sales on the books are 2.208 MMT (81.1 mil bu).

The BAGE said the outlook has improved for the 2023/24 wheat crop cycle following recent rains. They project production to bounce back in the 18 MMT range following this past year's drought-stricken crop of 12.4 MMT.

There continues to be issues with Ukrainian grain exports as the shipping line-up is beginning to grow with vessels that are unable to move into Black Sea ports, whether it be from slow inspections or other issues.

The EU agreed to suspend restrictions for another year on Ukraine imports. Back in June 2022 the EU lifted tariffs and other restrictions for another 12 months. The EU and Ukraine signed a free trade agreement that's been applied since 2016.

The Egyptian Supply Minister estimated the country's wheat strategic reserves at 5.9 months coverage.

Ukraine Ag Ministry data shows 2023 spring grain planting progress at 97% complete with nearly 5.3 mil hectares sown thus far. Acres this season are expected to be around 5.5 mil, down from last year's 5.9 mil hectares.

Export business around:
** Talk around that as much as 210,000 mt of EU origin milling wheat has recently been purchased for export to the US. The 30,000 mt cargoes were mainly sourced from Poland, but a couple were said to be of German origin.
** South Korean Flour millers are said to have bought 135 TMT of Aussie, Canadian and US wheat. The total included 50 TMT of US, 50 TMT of Aussie, and 35 TMT of Canadian.
** May 26 Taiwan Flour Mills are in for 56 TMT of different varieties of US milling wheat.